Thursday, August 30, 2012

Thursday Grabbag

I'll just update this one with any interesting tidbits.The first thing that catches my eye is Poland's lagging growth. Poland got hurt in 2008, but it may go into outright recession next year. This is a very large slowdown, relatively speaking. A 1% drop in GDP YoY over the course of one quarter is too large for comfort, and it raises questions. Poland has relatively high unemployment already.July Personal Income, US: Positive, but PCE did not meet expectations, and June's income and DPI were revised down from 0.5 and 0.4 to 0.3, respectively. Thus this month's 0.3 gain looks less than thrilling. Real PCE was -0.1 in June and +0.4 in July, so that is a big improvement. We'll see.Initial claims: Last week's initially reported 372K was revised up to 374K, and this week's headline is 374K. Last week I did not twitch because the four-week moving average was still in the 365-369K range, which is where I had expected it to be when the summer figures steadied up. However this week the four-week moving average climbs to 370,250K, so this bears watching.Covered employment of 127,495,952 is good. What is not good is that this takes us back to covered employment levels of June of 2001! That is how bad this sucks, folks. Eleven years, no growth in jobs. The height of covered employment in the last cycle was in December of 2008 at 133,902,387. Still more than 6 million behind. This is such a dispiriting statistic, but it is a terribly valid one, although it would look far worse population adjusted. Covered employment is a distinctly lagging indicator, but two cycles of lag?

Oh, well, might as well. See, this is why I sometimes don't blog for a bit. These things can be really depressing. Here's the population-adjusted graph:

This has every thing to do with why American household incomes are declining. It was on a slow downward slope before the Slump began, but it does not recover and in fact it gets worse when it shouldn't. nCovered employment is a slightly different indicator than standard employment. It includes actual jobs where unemployment insurance is deducted - thus it is a better measure of the real economy than official employment figures. It also has very little error, because it is derived from actual reports from state employment departments rather than sample surveys.

Eurozone retail PMI for August, which really only covers Germany, France and Italy, came in very poorly. I don't know what to make of the four-week slump in distillate sales - now at -6.2% YoY. Last year at the same time it was up 5.5% YoY. I'm tempted to blame 2% on low purchases of heating oil, but regardless it kind of looks like the economic Titanic/iceberg thang. Should this continue we can just send Obama a condolence card and a hearty recommendation for another Nobel prize (for consolation) in October.The bottom line is that the season of Bring has failed big-time this year, thus Bling ain't gonna be good.

KC Survey is on the bright side. Inventory is increasing, but shipments rose also so this is a pretty stable result, if not brilliant. The average workweek, seasonally adjusted, dropped (-5) and new export orders dropped (-6), but that is kind of a given, isn't it? International data has been most discouraging. The biggest problem here is stable sales prices and rising prices for materials (+26). Expectations are for increasing output pricing, which is understandable.

But there is a "natural" smoother - when the economy gets bad and especially full-time male jobs are lost, part-time low wage jobs that will have a lot of openings in "good" economies are rapidly taken up. Also more people work part-time jobs, which expands the number of accounts.

Believe it or not, the government double counts income when they report personal income. They include both transfer payments and government employee income. Trouble is, both are paid out of the personal income of the private sector.

The NBER (1) subtracts transfer payments from the personal income figure. So you don't have to believe me that the government double counts. They also adjust for inflation.

The reported 3.4% annualized growth in personal income January through July of this year goes down to 1.4% according to NBER. To be fair, the government reports this figure on page three. I subtracted out 75% (2) of government employee income as well and get .8% annualized growth in inflation adjusted personal income. That sucks. And this doesn't even adjust for growth of personal income on a per capita basis.

(1) NBER (National Bureau of Economic Research) is charged with the task of pin pointing the beginning and end of recessions. They use four main economic indicators, one of which is inflation adjusted personal income after subtracting transfer payments.

(2) I use 75% to account for the fact that government employees pay taxes and their taxes are included in the personal income report. (A federal government employee living in an income tax free state, doesn't pay any income taxes at all. A state government employee always pays federal income taxes.)

A lot of people want to increase the taxes on wages to pay for the life style of the retired. You can argue lifting the cap on the social security tax or raising Medicare tax rates but in a macro economic picture, you can't tax payroll much more without making real personal income of the private sector go into negative growth. MY CONCLUSION: Don’t raise payroll taxes.

Scott - I spent some time with these numbers, and the drag should already have been offset. The problem is that the economy isn't generating the jobs, and all too many of those young people are hiding out in higher education.

The no disability labor force participation rates 16-64 for Men, and Women sort of show that.